Why Pandora Shares Popped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Pandora (NYSE: P) rose more than 14% during intraday trading Tuesday, after the streaming music specialist yesterday named digital advertising veteran Brian McAndrews as its new CEO.

So what: McAndrews will replace Pandora's current CEO, Joe Kennedy, who has stayed on as the company searched for a replacement following his resignation announcement in March.

Previously, McAndrews served as President and CEO of aQuantive, a digital marketing company that Microsoft acquired in 2007 for more than $6 billion. Then, following a stint as a senior VP there, McAndrews left Microsoft in 2009 to join Madrona Venture Group as an investing partner.

Now what: Recognized as Advertising Age's first-ever "Digital Executive of the Year," and designated one of the 30 most-influential executives in his field by Adweek, investors are understandably excited about McAndrews' prospects for helping Pandora achieve sustainable profitability.

On that note, given increasing competition from the likes of recently launched services from Apple's iTunes Radio, to Microsoft's Xbox Music, as well as privately held companies like Spotify, it would also be hard to blame investors who choose to use today's pop as an opportunity to take profits until that happens.

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This appears to be nothing more than an over-hyped short squeeze to cause the pop. After the announcement of the new CEO, S&P repeated its strong sell warning (which was ignored by traders who were probably overcompensating for their short positions). This current share price is also not justified given the forthcoming competitive products by Apple which are rumored/estimated to cut into half of Pandora's client base.

See today's news... Put in an incompetent CEO in and the first order of business is to issue new shares to the detriment of its shareholders. Down 4% plus now. I'd sell and short as this incompetent CEO brings this company down to the real target prices of $16 or under (i.e. appx. 30-40% below current price). I await downward revisions by analysts.